We examine how product market competition affects firms' disclosure content. Theory suggests that competition leads firms to strategically disclose to avoid proprietary costs; however, the empirical evidence has been mixed. We investigate whether firms manage disclosure content to protect proprietary information, a disclosure strategy under-researched in the literature. We use a topic-modeling technique to extract and compare thematic topics that industry peers disclose in management discussion and analysis (MD&A) in 10-K filings. Exploiting large reductions in US import tariff rates as an exogenous shock to product market competition, we find that firms differentiate disclosure topics in response. This effect is more pronounced when disclosures incur higher proprietary costs, as theoretically predicted, and stronger for firms with greater product similarity to industry peers and those with longer MD&A disclosure texts.

This article investigates the role of mandatory interim financial reporting in financial analysts' annual earnings forecast errors. We provide large-scale evidence from 49 countries that a mandatory quarterly (as compared to semi-annual) reporting regime is associated with lower analysts' annual earnings forecast errors. This conjecture is further supported when we exploit an exogeneous change in the mandatory frequency regime from a semi-annual to a quarterly reporting mandate in Japan. Consistent with an improvement in the information environment, our findings are more pronounced for firms and analysts subject to higher information acquisition costs and in countries where the institutional setting is less able to meet analysts' information needs. We corroborate this conjecture by documenting that more frequent mandatory reporting decreases analysts' forecast dispersion and improves the profitability of their stock recommendations. Overall, our findings extend the research on the role of the institutional setting in analysts' output, suggesting that the mandate of more frequent reporting improves analysts' forecasting process.

Using a sample across 49 countries, we posit and find a positive relation between democracy and stock price informativeness. This influence of democracy extends beyond investor protection and is primarily attributable to the liberal and participatory principles. This relation is stronger for firms with a weaker external information environment and for countries with institutionalized protection of private information acquisition, indicating that democracy enhances firms’ external information environment and motivates investors to learn private information. Further analyses show a stronger relation when the government plays a more important role in an economy and during economic downturns, implying that government-related information contributes to the informational relevance of democracy. Stock prices also better predict firms’ future performance and investment activities in democratic countries. Overall, our results highlight the importance of democracy to capital markets and complement the literature on the economic consequences of democracy by showing an informational mechanism.

Exploiting the country-level adoption of public credit registries (PCRs), we document a positive impact of interbank credit information-sharing on firms' use of trade credit. The effect of PCRs is more pronounced in firms with greater financial needs, greater information asymmetry, and higher agency costs and in countries with weaker legal environments. PCRs with wider coverage, better availability, and stronger regulation also exhibit a greater impact on firms' use of trade credit. The results are consistent with the notion that interbank credit information-sharing incentivizes firms to maintain a good credit reputation with financial institutions, which increases their use of trade credit.

Prior literature suggests that cost stickiness increases the ex-ante volatility and reduces the predictability of earnings. We examine whether managers intentionally undo such consequences by dampening earnings volatility. Exploiting the staggered adoption of wrongful discharge laws as an exogenous instrument for cost stickiness, we document that cost stickiness increases managers' income-smoothing activities. This response is more pronounced in firms whose earnings are more sensitive to labour costs than their industry peers are and in firms with stronger information-provision incentives. Additional analyses indicate that income smoothing improves sticky-cost firms' earnings informativeness and that the identified impact of cost stickiness is primarily driven by labour costs. Our results suggest that labour regulations can influence managers' financial reporting incentives via cost behaviour.